The Real Change In The Cost Of A Big Mac If McDonald's Workers Were Paid $15 An Hour ---> Nothing

[geckosfeet]

Not that I am concerned about the cost of McBurger. But I think paying burger slingers and anyone who makes minimum wage at a rate that is moral, humane and responsible in this century is not only the right thing to do but it makes sense economically.

When these folks are paid $10, $12, $15 an hour they will be better able to participate in our "consumer" economy. They will pay their bills. They will buy groceries, booze (why not, "regular" people do) televisions, iPhones, cars, furniture, appliances, sex aids, artwork, books, electronic gadgets, health services and other professional services. They will be able to participate in the cacophony of consumerism that many of us take for granted and spend our "hard earned" money on every day.

In short, they will fuel the economy. Not with McBurgers, but with the money they earn from making and selling the McBurgers that in turn provide handsome dividends for McBurgers shareholders.

There's, as we all know, some 250,000 people working at Foxconn to make all that shiny shiny gadgetry. They’re paid $400 to $500 a month to do so. If all that manufacturing were done in the US people would be being paid $2,000 to $3,000 a month for the job: but there would be many fewer of them and many more machines. A change in the labour costs changes the trade off between employing labour and employing capital to reach the same production goal. This is of course why a rise in the minimum wage does indeed increase unemployment. Perhaps not much, not as much as some alarmists claim, but it really does.

Take a step back a moment. We all know that McDonald’s is indeed a rapacious capitalist organisation. It cares only about the profits being made for its shareholders, not for the wider group of stakeholders that is its employees and the community. We know this absolutely because this is the very thing that everyone is complaining about: McDonald’s cares so much about profits that it’s not paying a living wage to its workers.

Hmm. Well, what else can we surmise about a rapacious capitalist organisation? In that ruthless pursuit of gelt and pilf for its shareholders it is going to gouge the customers for the absolute maximum that it can, yes? This is what capitalists do: we hear people complaining about that all the time as well. What limits McDonald’s ability to entirely empty our wallets every time we want a hamburger is that there are other people who will also sell us one. Wendy’s, Jack in the Box, In and Out, there’s a multiplicity of places where we can go to fur our arteries. Which leads to our conclusion on pricing in a capitalist and free market economy. The capitalists charge the absolute maximum they can get away with, that ability being limited by the competition that comes from alternative suppliers.

..../

All of which means that the real change in the cost of a Big Mac, or the dollar menu, if McDonald’s workers were paid $15 an hour is: nothing. For production costs simply do not determine the prices that can be achieved in a competitive market.

The Real Change In The Cost Of A Big Mac If McDonald's Workers Were Paid $15 An Hour: Nothing

I don't get it. I don't get why or how shareholders as a general rule see cheating/stealing from their employees is a good way of doing business. I say cheating and stealing because they are paying the least amount they possibly can and reaping huge profits and dividends from the labor of what is essentially a captive workforce, while sitting in a boardroom looking at financial spreadsheets and raking in the profits. The front liners do the work, the suits take the money. Isn't that kind of like slavery?

I would suggest at this point that we have a nominal capitalist system. What it really is, is a legalized and socialized version of slavery where the slaves are give enough food and shelter to survive long enough to come back and work the next day. Isn't it time that we start seeing and calling our perverted version of a capitalist system for what is, and demanding change from the responsible parties? And ithe responsible parties refuse top be responsible then we must turn to government and ask for regulation. It is OUR government. We need to take it back from those same cheaters who are stealing from our labor force.

[Niceguy1]

1. realistically

U can't double their labor costs and not expect the prices to change.

[geckosfeet]

2. As long as doubling labor costs goes to workers pay, not hiring more management staff I

would be all for it. I will pay more. I can afford it. It's not going to cripple me to pay an extra $1 for the three or four times a year I go to Wendie's or any other burger joint. I might even walk into a Walmart if I knew that ALL the employees were being treated fairly and had employer provided health insurance.

And I would disagree with your statement only on the principle that I would have to see it to believe it. You statement is a convenient way of putting down the argument for raising the minimum wage. But I say prove it. I also say prove that a marginal increase in the cost of a McBurger or what have you will damage the economy.

Of course you can move figures around on an accounting ledger to "show and prove" anything. But hose are the numbers on paper. Theory. Not the real and tangible world.

If economic theories show us anything, it is that they are unreliable and full of hot air but provide extremely convenient arguments for the boardroom thieves. At this point I am leaning toward generating a body of empirical data based on real world action and reaction.

[Niceguy1]

3. and the loss of business

Would be devastating. Decent meal now is in the $8.00 range per person. Much more than that you are better off gong to a sit down resturant.

$15 per hour for a no skill job where you don't even have to speak english is insane.

[geckosfeet]

5. Well isn't that just so nice and elitist. Thank for continuing to propagate the myth/lie that

minimum wage workers are uneducated and likely illegal immigrants.

[Niceguy1]

7. I never said that.

Fact is inability tonspeak the language is a major obsticle for legal immigrants. The solution to the living wage issue is education and training, not artificially inflating wages to more than what even many people with college degrees make.

[geckosfeet]

8. Yes. There is that myth as well. Education and training. What we need is phd burger slingers.

Great idea.

[Niceguy1]

10. flipping

Burgers shouldrbe a temporary job..not a permanent job. Inflating wages does not solve the real problem of the workers not having any skills... with skills they can get a full time job, not a part time one that has random hours..

[Demit]

11. Nice theoretical, but there are plenty of people with skills now who can't find jobs.

Sure, that's the way it's supposed to be. That's the way it used to be. And by the way, part time jobs don't have to have random hours. That didn't used to be, either. That's a management decision to convenience themselves & the company. The way that companies used to train workers to have the particular skills the job required. Now they expect workers to somehow have acquired those skills themselves.

I don't think disparaging workers, doing jobs that companies obviously need workers for, is the way we should treat a workforce. Lesser-skilled jobs—and they require skills too!—are always going to exist. You could even argue that if companies treated their current workforce decently, it could lower the costs of constant turnover, of always breaking in new workers.

Why shouldn't "burgers" be a permanent job? Not everyone is able to be, or wants to be, a computer programmer or office worker or entrepreneur.

[Sherman A1]

14. +1000

[FBaggins]

4. Yes and no.

Prices are not just driven by costs of production... they're also driven by what customes are willing to spend. Sometimes you simply can't raise your prices and still keep your market share.

Where the article is correct, is that labor is replacable with capital. At a certain price point, it's cheaper to do a job with automation than with a person. A person doesn't take your order... a computer interface does (etc).

And there is a painful reality that likely follows. If the burger-joint wage doubles from $7.50 to $15.00 - not only do many of the jobs get replaced... but the jobs that remain require a higher skillset. Which likely means different employees.

So the people standing on the picket line could very well be shooting themselves in the foot if they got what they asked for.

[geckosfeet]

6. Again, a "the sky would fall" argument. I say prove it.

What if all companies in the market had the same minimum wage requirements. They would all be on equal footing.

Automation would be required, and there would be an arms race to get the best and most useful automation for the particular industry. People would have to do those jobs as well. I don't see how that hurts the economy.

Educated work force? Different skill sets? So what? Employers can train employees to push the right buttons at the right time. They do it all the time.

[FBaggins]

9. It isn't really a hypothetical

It has happened over and over and over again.

The assembly line of fifty people is replaced by machines run by five people with a higher skillset. They make lots more than the original line workers did... but there are far fewer of them. Tellers make more than they used to... but the branch has three of them instead of seven and ATMs and online banking do the bulk of the work.

Compare farms that require manual labor to those that are automated. The handful of people who operate the more modern combines are much harder to replace than field hands (and make much more)... but again there aren't as many of them (and they're different people).

This isn't a theory that needs to be "proven". It's a reality that needs to be learned.

Why do you think the call is for both a doubling of salary and unionization? What would you need a union for if your salary was already going to double? Simple... the union protects the members. Fights to keep the existing workers in those new jobs and train them up... rather than replace them with people who already have the higher skillset.

[geckosfeet]

13. Well we disagree there.

Workers may be displaced by automation but those that remain certainly don't make that much more than they did before.

Anyone can learn to run a machine. Employers hire people for as little as possible and show them which buttons to push. Yes there are additional skills, farming as your example, but in addition to farming ghe lower wage farm hand now learns to run a machine. I am pretty sure that he will not be rewarded with a huge raise. He will be exploited and tossed if he complains.

[proud2BlibKansan]

12. You can if you don't pay your CEO an exhorbitant salary

[FBaggins]

15. Don't be silly.

There's an argument to be made about pay equity, but not that you could pay the employees lots more if you got rid of it.

McDonalds, as an example, just gave their CEO a big raise as he took over the company - boosting him from a piddly $4.1 million to $13.8 million.

But if you got rid of his salary entirely, the company's 1.8 million employees would each get less than an extra $10 per year.

[AverageJoe90]

16. This will no doubt piss off the austerity worshippers.

Not just talking about the rightist Randians, either: there's also that little clique of "The economy must end to save Earth's future" faux-left types(they know who they are!) who are all too fine & dandy with the prospect of continued economic stagnation, even if they're not willing to be open about it.

And that is one of the many reasons I support a living wage......

[geckosfeet]

17. Good points. Somewhere between the spectrum of "crash it all" and austerity programs that

favor corporations and rich, there has to be a path that helps the majority of the American people, indeed people of the world, and fuels the economy at the same time.

The rich are opposed because they will have to give up a little power and money, and the libertarians and anarchists are opposed because it's not libertarian or anarchy.

Then there are those who say "I got mine, why should I worry about them". This is a problem because these are the people who may one day lose what they have (job house, car etc.) and find themselves struggling at minimum wage for a time.

[hay rick]

18. The Aussies do it.

Story here: http://www.theatlantic.com/business/archive/2013/08/the-magical-world-where-mcdonalds-pays-15-an-hour-its-australia/278313/

Footnote at the bottom of this article:

Ron Paul, president of the food industry consulting firm Technomic, told me that as a rule of thumb fast food franchises assume labor will make up 30-to-35 percent of their expenses. As Columbia Journalism Review's Ryan Chittum noted last week, McDonald' s reports that worker pay makes up about 30 percent of expenses at its corporate-owned restaurants. He also dug up a handy chart from Janney Capital Markets, which estimates that labor makes up 26 percent of all expenses for an average McDonald's franchisee.

Bottom line: if typical wages are $7.50 and represent 26% of costs and if other costs remain unchanged and the wage doubles, prices should only increase by 26%. If all competitors did the same because they were forced to by wage laws, the businesses should remain profitable. They would lose some business because of higher prices but they would also gain some new business because so many working people would have more discretionary income. The increased wages would also increase taxable income and tax receipts- particularly payroll taxes.

[geckosfeet]

19. Interesting article

So how exactly do McDonald's and other chains manage to turn a profit abroad while paying an hourly wage their American workers can only fantasize about while picketing? Part of the answer, as you might expect, boils down to higher prices. Academic estimates have suggested that, worldwide, worker pay accounts for at least 45 percent of a Big Mac's cost. In the United States, industry analysts tend to peg the figure a bit lower -- labor might make up anywhere from about a quarter of all expenses at your average franchise to about a third.* But generally speaking, in countries where pay is higher, so is the cost of two all beef patties, as shown in the chart below by Princeton economist Orley Ashenfelter. Note Western Europe way up there in the upper-right hand corner, with its high McWages and high Big Mac prices.

That said, not every extra dollar of worker compensation seems to get passed onto the consumer. Again, take Australia. According to the The Economist, Aussies have paid anywhere from 6 cents to 70 cents extra for their Big Macs compared to Americans over the past two years, a 1 percent to 17 percent premium. If you were to simply double the cost of labor at your average U.S. Mickey D's and tack it onto the price of a sandwich, you'd expect customers to be paying at least a dollar more.

The cost of raw materials is higher an they pay higher wages - but the increase in the cost of the finished product seems not to be proportional. The cost is higher of course, but does not fully capture the doubling of wages and higher materials costs. They must have better run businesses as the article suggests.